Paraguay is a South American country that borders Brazil. With a population of over 7 million and plenty of natural resources, Paraguay is a great location for your company’s expansion. But before you begin hiring, you need to set up payroll. Here are a few important considerations when setting up payroll in Paraguay.

Taxation rules in Paraguay

Paraguay’s taxation laws set almost all contributions for employees at 10%, including corporate, income, and sales taxes. Individuals in the lowest tax bracket have an income tax requirement of 8%. The only exception is that employers pay 16.5%, and employees pay 9% to social security. The country uses a pay-as-you-earn (PAYE) system, so employers are responsible for deducting taxes from employees’ paychecks.

Paraguay payroll options for companies

There are 3 common Paraguay payroll options:

  • Internal: An internal payroll works for large companies with a large HR team. However, this option requires a larger budget and setting up a subsidiary.
  • Paraguay payroll processing company: A Paraguay payroll processing company is another option for businesses that would rather outsource. In this case, you’ll still be liable for all compliance matters and will have to keep up with the country’s tax and labor laws.
  • G-P: The easiest way to run payroll in Paraguay and stay compliant is partnering with an Employer of Record (EOR) like G-P. With us, you can rest assured that all employees will be paid on time, freeing you to focus on other important aspects of your business.

How to set up a payroll in Paraguay

In order to set up a Paraguay payroll, you’ll need a registered entity in the country. A subsidiary is necessary to handle everything from payroll to hiring employees and providing compensation and benefits. However, you can bypass entity setup when you work with G-P. Companies can leverage our existing subsidiary to begin hiring in minutes, not months.

Entitlement/termination terms

One of the most difficult aspects of global expansion is figuring out how to hire and terminate an employment relationship compliantly. The best way to establish entitlement and termination terms is through a written employment contract.

For example, employers must notify all employees of a dismissal in writing, but the notice period depends on how long the employee has worked for your company. Employees are entitled to severance pay in the case of an unjustified dismissal.

Streamline global payroll management with G-P

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Our platform is designed to integrate with the systems you already use. Sync employee payroll data automatically to create one reliable source of truth for your HR team.

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